Some investors rely on dividends to grow their wealth. If you’re a dividend enthusiast, you might be interested to know the following: Keck Seng Investments (Hong Kong) Limited (HKG:184) has an ex-dividend date in 3 days. The ex-dividend date is one business day before the record date. The record date is the cut-off date for shareholders to be on the company’s books and be eligible to receive dividends. The ex-dividend date is important because every time a stock is bought or sold, it takes at least two business days for the transaction to settle. So, you can buy Keck Seng Investments (Hong Kong) shares before June 6th to receive the dividend the company will pay on June 27th.
The company’s next dividend payment will be HK$0.08 per share, and in the last 12 months the company has paid a total of HK$0.16 per share. Looking at last year’s total dividend payments, Keck Seng Investments (Hong Kong) is yielding 6.8% on the current share price of HK$2.36. Dividends can be a major contribution to investment returns for long term holders, but only if they continue to be paid. As a result, we always check whether dividend payments are sustainable and if the company is growing.
Check out our latest analysis for Keck Seng Investments (Hong Kong)
Dividends are typically paid from company profits. If a company pays out more as dividends than it earned in profits, the dividend may be unsustainable. Keck Seng Investments (Hong Kong) paid out just 17% of its profits in dividends last year, a modest amount that likely leaves some room for surprises. However, cash flow is usually more important than profits for assessing the sustainability of a dividend, so we should always check if a company generated enough cash to pay its dividend. Happily, Keck Seng Investments paid out just 9.1% of its free cash flow as dividends last year.
It’s good to see that Keck Seng Investments (Hong Kong)’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
To see how much of its profit Keck Seng Investments (Hong Kong) paid out over the last 12 months, click here.
Are profits and dividends increasing?
Stocks in companies that generate sustainable earnings growth often have the best dividend prospects, as they are easier to raise dividends when earnings are rising. If business falters and the dividend is cut, the company’s value could fall sharply. With this in mind, it’s encouraging to see the steady growth of Keck Seng Investments (Hong Kong), which has seen its earnings per share grow by an average of 2.2% over the past five years. Growth has been slow, however, with over 75% of profits retained in the business, there is plenty of room to reinvest in growth or increase the dividend payout ratio, either of which could lead to dividend increases.
Another key way to gauge a company’s dividend prospects is to look at its historical rate of dividend growth. Keck Seng Investments (Hong Kong)’s dividend has fallen at an average of 1.2% per year over the past decade, which is not a great picture.
Final conclusion
From a dividend perspective, should investors buy or avoid Keck Seng Investments (Hong Kong)? Earnings per share growth has been growing moderately, and Keck Seng Investments (Hong Kong) is paying out less than half of its earnings and cash flow as dividends. This suggests that management may be reinvesting heavily in the business, but there is also room to increase the dividend over time, making it interesting for a few reasons. While faster earnings growth is preferable, the best dividend stocks over the long term usually combine strong earnings per share growth with low dividend payout ratios, and Keck Seng Investments (Hong Kong) falls somewhere in the middle. Keck Seng Investments (Hong Kong) looks solid overall in this analysis, so it’s worth considering investigating it further.
In that regard, we need to look at what risks Keck Seng Investments (Hong Kong) faces. Our analysis shows that: 2 warning signs for Keck Seng Investments (Hong Kong) You should be aware of these points before purchasing the stock.
If you’re looking for stocks with high dividends, Check out our picks for the top dividend stocks.
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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
